Consider an unleveraged company worth $150 million. The average investor in the company faces a 15%...

Consider an unleveraged company worth $150 million. The average investor in the company faces a 15% tax rate on equity investments and a 40% tax rate on debt investments? If debt of $50 million is borrowed and invested by the company and the company faces a 40% corporate tax rate, what is the new value of the company?

Please show work on Excel if you can.

Thank you!

Solutions

Expert Solution

value of new company = value of levered company = VL

VL =	157.5 million

jeff jeffy answered 11 months ago

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